Correlation Between Nexon Co and Nintendo

Can any of the company-specific risk be diversified away by investing in both Nexon Co and Nintendo at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nexon Co and Nintendo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nexon Co Ltd and Nintendo Co, you can compare the effects of market volatilities on Nexon Co and Nintendo and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nexon Co with a short position of Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexon Co and Nintendo.

Diversification Opportunities for Nexon Co and Nintendo

-0.5

Correlation Coefficient

Nexon Co  Nintendo

Very good diversification

The 3 months correlation between Nexon and Nintendo is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nexon Co Ltd and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo and Nexon Co is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nexon Co Ltd are associated (or correlated) with Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo has no effect on the direction of Nexon Co i.e., Nexon Co and Nintendo go up and down completely randomly.

Pair Corralation between Nexon Co and Nintendo

Assuming the 90 days horizon Nexon Co Ltd is expected to under-perform the Nintendo. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nexon Co Ltd is 1.42 times less risky than Nintendo. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Nintendo Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,901  in Nintendo Co on December 1, 2024 and sell it today you would earn a total of  1,529  from holding Nintendo Co or generate 25.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Nexon Co Ltd  vs.  Nintendo Co

Nexon Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexon Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nexon Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nintendo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexon Co and Nintendo

The main advantage of trading using opposite Nexon Co and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexon Co position performs unexpectedly, Nintendo can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nintendo will offset losses from the drop in Nintendo's long position.

The idea behind Nexon Co Ltd and Nintendo Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.